Compost Wholesalers presently uses a public warehouse agreement to finance most of its inventory.  The average amount of inventory is $4,000,000, the bank will loan at 5.5 % per annum for the 6-week loan.  The loan amount will be against 70 percent of the value of the inventory, and the public warehouse fee is $2,500 per week.  Total transportation cost for the loan period is 1.5 percent of the average value of the inventory [that is, (0.015)($4,000,000)]. Find period rate Find m Find the annual percentage rate (APR) Find the effective annual cost (EAR)

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Compost Wholesalers presently uses a public warehouse agreement to finance most of its inventory.  The average amount of inventory is $4,000,000, the bank will loan at 5.5 % per annum for the 6-week loan.  The loan amount will be against 70 percent of the value of the inventory, and the public warehouse fee is $2,500 per week.  Total transportation cost for the loan period is 1.5 percent of the average value of the inventory [that is, (0.015)($4,000,000)].

  1. Find period rate
  2. Find m
  3. Find the annual percentage rate (APR)
  4. Find the effective annual cost (EAR)
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